Who exactly are millennials and why do they represent both a challenge and huge growth potential for banks today?
Meet the millennials
Millennials, also known as Generation Y, were born roughly between 1980 and 2000. They now outnumber Baby Boomers by four percent in the United States, a demographic trend expected to be replicated in Australia.
They are often characterised as being narcissistic, selfie-obsessed and wanting everything NOW. On the plus side, millennials are also considered to be tech-savvy, well-educated, mobile, confident and more likely to value experiences over possessions. They are also rapidly maturing in terms of their economic strength, social influence and political power.
What do millennials want from their bank?
The needs and preferences of millennials are not the same as previous generations. They are even markedly different from those of Gen X, their immediate predecessors. Millennials want banking that is personalised, omni-channel, mobile and on demand. They would much rather do banking on a smartphone than in person. And, as noted by Ani Paul from ING Direct Australia, they are much more assertive than the previous generation in demanding digital services. There are some important considerations for banks as they reinvent the customer experience for millennials. These include:
Millennials have the ‘wallet size’
The data doesn’t lie: Millennials are big spenders. Their average ‘wallet size’ (defined as total balance value of deposits and lending) is now greater than all other demographics in 50 percent of the countries studied in a recent Telstra report. Millennials lead the ‘experience’ economy, which lends itself to flexibility and mobility. They increasingly demand mobile-first banking, which requires banks to be engaged in progressive digital transformation.
Millennials are more open to non-traditional ways of payment
To attract and retain millennials as customers, banks should be looking to develop easy ways to transfer money via digital means (i.e. online and mobile apps) between non-account holders. Millennials are at the forefront of using non-traditional payment methods such as peer-to-peer payments and are also keen users of companies such as Paypal and Venmo. They are attracted to the convenience, mobile support and ease of use of these methods of payment.
Less loyalty = potential loss of millennial market share
Millennials have less loyalty to their workplace and to any provider of a service (including their bank!) than previous generations. Their loyalty needs to be earned and maintained with the convenience of mobile payments. According to FICO, younger demographics (aged 18 to 34) are twice as likely to use mobile payment services such as Apple Pay, Google Wallet and others compared to those over age 35. The message to banks who want to stay competitive is to set targets to roll out these services in the coming year.
Communicate on their terms
Millennials become frustrated when service providers don’t ‘get’ them or fail to communicate on their terms. FICO found that 43 percent of millennials don’t think their bank communicates to them through their preferred communication channels. (Texting is the preferred mode for one in four millennials.)
Millennials want their customer experience to be personalised and seamless. They dislike inconsistency of processes across customer touch points. And while just about everyone wants to receive relevant, consistent and personalised communications from their banks, millennials prefer their communications via:
- Mobile apps
- The bank website
Millennials respond well to analysis of and response to, their preferred mode of communication. As such, banks must leverage and scale their analytics and automated communication tools via digital channels to keep the growing cohort of millennials on side.
The way forward
Millennials are looking for the best match between their needs and preferences and banking services. This makes for an exciting time for the banking industry with the convergence of new technologies, alternative banking and a receptive generation about to hit its prime in terms of banking and finance needs. Banks need to be agile and proactive in the digital game to be competitive in the new ‘experience economy’. To find out more about how banks can thrive in a digitally-driven world, download our white paper.